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Daily Newsletter, Monday, 09/30/2002

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PremierInvestor.net Newsletter                 Monday 09-30-2002
                                                  section 1 of 2
Copyright  2001, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================

In section one:

Market Wrap:      So Long, September
Watch List:       DDS, GPI, MCD, GS
Play of the Day:  More High Volume Declines

*******************************************************************
MARKET WRAP  (view in courier font for table alignment)
*******************************************************************
      09-30-2002           High     Low     Volume Advance/Decline
DJIA     7591.93 -109.52  7698.81  7460.78 2.00 bln   1209/1539
NASDAQ   1172.06 - 27.10  1190.74  1160.07 1.66 bln   1456/1799
S&P 100   407.25 -  5.97   413.22   399.46   Totals   2665/3338
S&P 500   815.28 - 12.09   827.37   800.20
RUS 2000  362.27 +  0.49   363.79   354.30
DJ TRANS 2151.07 - 34.10  2185.12  2102.55
VIX        44.57 +  1.43    47.50    43.19
VXN        58.36 +  0.50    61.41    57.68
Total Vol   3,671M
Total UpVol   958M
Total DnVol 2,638M
52wk Highs   56
52wk Lows   439
TRIN        1.71
PUT/CALL    1.09
*******************************************************************

===========
Market Wrap
===========

So Long, September
By John Seckinger

Good Riddance.  For the month of September, the Dow lost an 
impressive 1,072 points.  Looking at the third quarter as a 
whole, the blue chips finished lower by 1,652 points.  
Coincidence or not, the 3rd quarter of 2001 represented a loss 
of 1655 points.  On a percentage basis, the Dow lost 17.8% in
the 3rd quarter, and, according to the Stock Trader's Almanac, 
only the 30.7 percent drop during 1931 was worse.  For the year, 
the Dow is down 2,430 points, or 24%.  Looking at other markets, 
the Nasdaq lost roughly 11 percent for September and 20 percent 
for the quarter, its fourth-worst third-quarter performance ever.  
The S&P suffered its worst third-quarter results since 1987, 
dropping about 17 percent for the quarter and 11 percent for the 
month.

Looking at September 30th specifically, this last trading day of 
the month and quarter certainly started out on a powerful down 
note.  The blue chips opened down over 100 points during the 
first few minutes of trading, soon after testing the July 24th low 
of 7532 and buyers’ patience.  Speaking of technical levels, the 
late-day rebound did have the Dow test the July 23rd low of 7682 
(7685 high rebound level) before falling into the close.  At 
session’s close, the Dow had fallen by 109 points, or 1.42%, to 
7591. 

The catalysts were numerous.  Traders first focused on foreign 
markets showing sizable losses overnight; France lower by 5.3%, 
Germany off 4.7%, and the UK down 3.75% before the U.S. markets 
had a chance to open.  Bonds were up significantly, and stock 
futures all were showing deep shades of red.  Other negative 
developments included GE cutting estimates, WMT lowering sales 
guidance, an EBAY downgrade, coupled with weak economic reports.  
Sectors coming under pressure on Monday included Retail, 
software, semiconductor, and networking issues.  Indices that 
outperformed were gold, biotech, tobacco, and utility shares.  

Beginning with General Electric (GE), Merrill Lynch cut estimates 
early on Monday to reflect concerns over a deteriorating economy 
and GE’s short cycle business plan.  The earnings cuts by Merrill 
followed similar statements from Lehman and CSFB during Friday’s 
session.  Shares of GE closed higher by 0.18 cents at 24.65, 
rebounding from a low of 23.51 and attempt to test 23.02 low set 
on July 24th.  Under 23.02, and a chartist would have to look back 
to October 1998 to find support.  

Wal-Mart, on the other hand, lowered sales guidance and took the 
entire retail sector down with it.  The company reportedly 
lowered September same-store sales towards the low-end of the 
rand (3-6%), and also stated that FY 2002 earnings will come in 
at 1.76-1.78 versus consensus estimates of 1.79.  Shares of WMT 
fell 3.90% to 49.24, while the S&P Retail Index lost 11.51 
points, or 4.16%, to close at 264.54.    

Taking down technology issues was helped by shares of eBay 
(EBAY), losing 8.15% to 52.81 after being downgraded by RBC 
Capital Markets to “under perform” from “sector perform” and 
having its price target cut to $45 from $70.  Other technology 
shares losing ground included shares of Intel (INTC), falling by 
5% to 13.89 after the company’s CEO said he doesn’t expect a real 
turnaround in computer sales until companies return to 
profitability and start spending money on technology.  Rounding 
out the technology behemoths, MSFT, CSCO, and IBM all went lower 
on Monday as the Nasdaq and QQQ’s lost 2.25 and 2.76%, 
respectively.    

If foreign and domestic equity weakness was not enough, investors 
had to deal with weaker-than-expected economic releases.  
Starting with Personal Income and Spending reports, both fell 
short of the 0.5% expectations economists had hoped for.  
Personal Income rose 0.4%, while Personal Spending increased a 
mere 0.3%.  The retail sales and august employment report 
portended strong consumption figures; however, spending on the 
service level was tame while growth within the auto sector 
remained volatile.  This shortfall should have economists looking 
for slightly less growth out of the 3Q GDP.

The main economic release on Monday came at 10:00 a.m.  Bonds 
were already significantly higher, the Dow was near its intra-day 
low (hindsight of course), and the release of the Chicago 
Purchasing Manager’s Index (PMI) evidently lead to some temporary 
capitulation.  Expectations were for a slight decrease to 53 from 
54.9, month prior.  Therefore, the 6.8-point drop to 48.1 and 
first sub-50 reading since January was clearly unexpected.  
Regional volatility in new orders was the likely culprit, falling 
6.6 points to 49.2.  In May, new orders came in at 65.6.  Note: 
September ISM Index will be released at 10:00 a.m. on Tuesday, 
with expectations for a slight up tick in growth to 51 from 50.5.  

Gathering attention before, during, and after the Chicago’s PMI 
Index was activity in the bond market, especially the two-year 
note.  The cash 2-year note closed at 1.69%, below the Fed Funds 
rate of 1.75%.  This is called a "negative carry," since it will 
cost institutions 1.75% to borrow money that they need to hold 
inventory of 2-year notes.  Historically, the 2-year note has 
fallen under the Federal Funds rate only four times in the last 
13 years.  Following such an occurrence, the Fed usually lowers 
the funds rate within the next few months.  Note:  The next 
meeting is November 6.  

Another barometer for Fed action is the implied yield on the 
federal funds futures contract, currently indicating that there 
is almost a 100-percent chance the Fed will cut rates by 0.25 
percentage points before its next policy meeting.  The December 
Fed Funds futures contract is currently at 98.57, or 1.43% (32 
basis points under the Federal Funds rate).  

Keeping with bond futures theme, it was interesting that the 
December Bond closed only three ticks above its opening level of 
114-05.  The high in the contract was 114-31 (double-top with 
last Wednesday), while the recorded low was 114-07.  At 3 p.m. 
eastern time, the 30-year closed at 114-08.  This could give some 
fixed-income participants reason to take profits and enter 
equities.  

The yield curve, on the other hand, closed very strong, with the 
five-year note up 20.5 ticks and 10-year bond higher by 20.  This 
is a 43 tick steepener and significantly bearish for stocks.  

Looking into the future, portfolio managers on Tuesday will now 
have to decide which stocks need to be sold and which issues they 
“really” want to own.  The window dressing unwinding.  Moreover, 
concerns over which companies might warn and which will have 
their earnings cut for quarters extending throughout 2004 will 
also be in the spotlight.  According to Thomson First Call, the 
third-quarter ratio of negative to positive earnings pre-
announcements fell to 2.2 versus 3.5 this time last year when the 
economy was clearly in a recession.  

Time for some technical analysis.  Beginning with a chart of the 
Dow, the objective this morning most likely was for a test of the 
July 24th low of 7532.  After that, bears most likely looked for 
7401 to be challenged, an area set during September 1998.  
Reasons for not testing the 7401 level included support from the 
regression line (coming in near 7460) and the chance that the RSI 
bullish divergence is a sign of a possible reversal.  Other 
reasons could have been a self-fulfilling double-bottom and/or 
profit taking out of bonds and back into stocks.  

Chart of the Dow Jones Industrial Average, Daily   




Turning to the QQQ’s, the much-discussed Head and Shoulders 
formation is still on track to meet its 17.64 objective.  A move 
back above the ascending neck line (now currently near 22.25) 
will most likely nullify the H&S pattern.  It is also interesting 
the that the RSI indicator failed to make a new low as the QQQ’s 
continued its descent: A Bullish Divergence indicator.  Note:  
Some necklines may be drawn different, resulting in an objective 
above or below 17.64.  

Chart of the Nasdaq-100 Index (QQQ), Daily  




The fixed-income arena shows extreme price action as well (see below).  
Looking at a chart of the 30-year bond, YIELDS have set 
a new record low monthly close and could possibly portend one 
more wave lower before recovery.  Not coincidentally, the RSI is 
diverging as well.  This divergence portends higher yields, which 
should be bullish for stocks.  And, like the Dow, there is a good 
chance YIELDS will find temporary relief once the regression line 
is tested.  

Chart of 30-year Treasury Bond Index, Monthly  




To recap, the ISM report on Tuesday will garner much attention, 
as will price action within Treasuries and possible negative 
earnings announcements.  Risk continues to be shifted into the 
bears’ camp, but, as always, this does not mean that the selling
will stop.  As a trader, watch price action very closely and keep 
those stops tight.  Who knows, maybe the Fed will surprise us 
before the week is out.  




==================================================================
WATCH LIST
==================================================================

The PremierInvestor.net watch list is not designed to be read
as full fledged stock picks.  Rather we would prefer to offer
it as an extra tool in today's investor toolbox.  Think of it
as a radar screen with your own radar operator pointing out
interesting developments, technical patterns or potential plays
that you may or may not have seen on your own.  Due to time
constraints we do glance at the news but rarely do we have 
time to fully read pertinent news stories, due background 
research and other necessary screens that investors should do
before making a decision.  A common exercise is to read the
entry, glance at the sector and other stocks in that industry
and then compare what's happening in the stock to what's 
happening in the broader market indices.  We hope you enjoy
the Watch List and that it proves to be a useful tool for your
own trading success.

STOCKS WORTH WATCHING
---------------------------------

Dillards Inc - DDS - close: 20.18 change: -1.27

WHAT TO WATCH: The retail sector was taken out behind the 
woodshed and spanked on Monday.  The news from Wal-Mart, the 
world's largest retailer, that their Q3 numbers would be lower 
than expected did not sit well with investors.  Combine concern
s over an exhausted consumer with the situation regarding the 
dock workers in California and suddenly there might be higher 
risks than expected in retail stocks.  We're not suggesting any 
sort of play in DDS right now.  Shares traded below support of 
$21 and $20 early this morning but were able to rebound.  What we 
want to watch is for any sort of failed rally at the $21.00 to 
$21.50 area or a rollover back under the $20 mark.  




---

Group 1 Automotive - GPI - close: 22.35 change: -1.93

WHAT TO WATCH: Retail stocks got hammered today (as mentioned 
above) but auto stocks have also been weak.  GPI is getting 
squeezed for being a part of both groups.  Stock failed at its 
50-dma on Thursday and the last two sessions have left the share 
price below the July 02 lows.  Is GPI due for a bounce?  Sure it 
is but we think the stock is headed for $20.00.  More patient 
traders who would prefer to short it near resistance can look for 
a failed rally at $24, the stock's new short-term overhead 
barrier.





---

McDonalds Corp - MCD - close: 17.66 change: -0.71

WHAT TO WATCH: Shares of MCD were cut almost in half this quarter 
and unfortunately for shareholders the descent does not yet 
appear over.  Shares tried to hang on last week and consolidated 
sideways near the $18 level but Monday's market weakness was to 
much and the stock gapped lower, tried all day to get back above 
the $18 mark, and failed.  We're not recommending any positions 
in the play but the situation looks bearish despite the extremely 
oversold technical indicators.




---

Goldman Sachs - GS - close: 66.03 change: -0.10

WHAT TO WATCH: Shares of GS are holding up rather well, 
relatively speaking.  The brokers/banking industry has been hit 
with abnormally low trading volumes and almost no M&A activity to 
speak of.  GS' stock has been trying to hold support at the 
$64.50 level and has bounced there three times in the last six 
sessions.  Should this level break a bearish position could be do 
well despite the oversold indicators.  






===============
Play-of-the-Day  
===============
(( BEARISH PLAY ))

ChevronTexaco - CVX - close: 69.25 chg: -1.72 stop: 73.61

Company Description:
ChevronTexaco is a leader in the global energy business with wide-
ranging activities in more than 180 countries. ChevronTexaco is the 
third-largest energy company in terms of global oil and gas reserves 
(more than 11 billion barrels of oil and gas equivalent) and fourth 
largest in global oil and natural gas production (2.7 million barrels 
of oil and gas equivalent per day). It has the capacity to refine more 
than 2 million barrels per day, sells more than 5 million barrels of 
fuel and products daily and owns or has interest in more than 25,000 
retail outlets under Chevron, Texaco and Caltex brands. In the United 
States, the company currently markets gasoline under the Chevron brand 
at 8,100 retail outlets in 28 states, primarily in the West, Southwest 
and South and in the District of Columbia and operates six refineries. 
(source: company press release)


- ORIGINAL WRITE UP: September 27th, 2002 -

Why We Like It: 
Here we go again. We were moderately successful with a technicals only 
play on oil company Ameranda Hess (AHC) and the stars have aligned 
again for a bearish move but this time we're going to use CVX as our 
mode of transportation. As per the AHC write up, the price of crude oil 
is slowly rising and shows no signs of stopping but the share price of 
oil companies is falling and these too show no signs of stopping. 
Please review the annotated charts we have listed for the patterns we 
are playing. More conservative traders could use a move under the $70 
mark to go short on CVX. We are choosing to open shorts at current 
levels. The stock performed a perfect failed rally at descending 
resistance. Thus we can stick our stop just above Friday's high and 
limit our risk ($73.61). Short-term traders could target the $67.50 
area but we are going to aim for a move to $65.65 or the July low to 
cover for a profit.

- Play-of-the-Day Comments: September 30th, 2002 -

The oil group continues to slide and we like the way the OIX fell under
back from its 50-dma just as CVX did.  The close under $69 looks 
tempting for new short positions as was the intraday failed rally at
$70 Monday afternoon.

Picked on September 27th at $70.97
Results since picked:        +1.72
Earnings Date             07/30/02 (confirmed)







=================================================================
To stop receiving this PremierInvestor.net Newsletter,
send email to Contact Support
=================================================================
DISCLAIMER
=================================================================

This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.

Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

*****************************************************************
ADVERTISING INFORMATION

For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.

*****************************************************************


Copyright  2001  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.



PremierInvestor.net Newsletter                  Monday 09-30-2002
                                                   section 2 of 2
Copyright  2001, All rights reserved.
Redistribution in any form is strictly prohibited.

The entire newsletter is best viewed in COURIER 10 for alignment
=================================================================

In section two:

NetBulls Tech Stocks
  Triggered Short Plays:   MERQ

StockBottom Non-tech Stocks
  Triggered Short Plays:   AL, BLS, JPM

High-Risk/Reward Stocks
  Triggered Short Plays:   BGEN
  

Trading Ideas
  Value Plays With Bullish Signals
  Breakout to Upside (Stocks $5 to $20)
  Breakout to Upside (Stocks over $20)
  Breakout to Downside (Stocks over $20)
  Recently Overbought With Bearish Signals (Stocks over $20)


=================================================================
Net Bulls Tech Stocks (NB) section
=================================================================

===============
NB Play Updates
===============

*TRIGGERED PLAY*
----------------

Mercury Interactive - MERQ - close: 17.16 chg: -0.91 stop: 19.56

The market weakness did a number on the software sector this Monday
and MERQ was no exception.  We were triggered early on as shares 
fell sharply from the open.  The afternoon rebound was a potential
worry but bears reasserted themselves and established new short-
term resistance at the $18 mark.  






=================================================================
AT Active Trader/Non-tech plays
=================================================================

*TRIGGERED PLAY*
-------------

Alcan Inc - AL - close: 24.68 chg: -0.22 stop: 25.51

We were triggered on this bearish play when AL opened between
$24.50 and $24.00 at $24.17 Monday morning.  The stock quickly 
rebounded but could not crack the $25.00 mark.  This is 
encouraging for the bears but we'd prefer to see a little
more confirmation before initiating any new positions.  




---

BellSouth - BLS - close: 18.36 chg: -1.25 stop: 20.82

The opening trade at $18.80, well below our trigger at 19.32 
put us into a hypothetical bearish position for this telecom
play.  Shares consolidated sideways most of the session and were
heading lower into the close.  We're going to leave our stop
at 20.82 for the moment and reassess our risk after Tuesday's
close.




---

J.P. Morgan - JPM - close: 18.99 chg: +0.65 stop: 20.01

We are more than a bit surprised that on yet another triple-
digit down day for the Industrials, and a day where the Dow
traded below the 7500 mark, that shares of JPM actually 
closed higher.  Unfortunately, this was not before the stock
traded below the $18 mark and triggered us short at $17.99.
We're going to keep our stop at 20.01 for the moment and see
how the play progresses.






==================================================================
High Risk / High Reward (HR) section
==================================================================

*TRIGGERED PLAY*
-------------

Biogen Inc - BGEN - close: 29.27 chg: -0.12 stop: 32.01

Shares of BGEN performed similar to our play in JPM.  We were 
triggered early on but soon after the stock rallied.  Fortunately
for the bears, the rally failed at over head resistance at $30.00.
Given yet another failed rally traders looking to initiate new 
positions might do so but be sure to confirm weakness in the
sector index (BTK.X) and/or the broader markets.







==================
  Trading Ideas
==================

This section contains stocks that meet criteria which may make
them of interest to long and short side traders.  These are not
recommendations, nor have they been reviewed by PremierInvestor
editors for investment potential.  However, each of them has
technical and fundamental characteristics that make them worthy
of further review by traders and investors looking for fresh ideas.
New stocks will appear daily following the market close.


Value Plays With Bullish Signals 
--------------------------------- 
Ticker  Company Name               Close     Change 

FDP     Fresh Del Monte Produce    25.59     +1.64
MNTR    Mentor Corp                31.88     +1.59
SLGN    Silgan Holdings Inc        28.44     +1.27
PFSB    Pennfed Financial          27.49     +0.73
STTX    Steel Technologies         16.96     +0.96

--------------------------------------- 
Breakout to Upside (Stocks $5 to $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

WHES    W-H Energy Services        17.30     +1.70
STC     Stewart Info Services      21.35     +0.70

--------------------------------------- 
Breakout to Upside (Stocks over $20) 
--------------------------------------- 
Ticker  Company Name               Close     Change 

STE     Steris Corp                24.91     +1.16
TECH    Techne Corp                32.79     +1.24
EVG     Evergreen Resources Inc    40.98     +1.32
SRDX    Surmodics Inc              31.77     +2.24

------------------------------------------- 
Breakout to Downside (Stocks over $20) 
------------------------------------------- 
Ticker  Company Name               Close     Change 

WMT     Wal-Mart Stores            49.24     -2.00
IBM     Intl Business Machines     58.31     -2.05
FNM     Fannie Mae                 59.54     -1.97
TGT     Target Corp                29.52     -2.39
KSS     Kohl's Corp                60.81     -3.28
S       Sears Roebuck              39.00     -1.62
CVS     CVS Corp                   25.35     -2.04
HIG     Hartford Fncl Services     41.00     -1.33
PBG     Pepsi Bottling Group       23.40     -1.19
FD      Federated Dept Stores      29.44     -1.73
HB      Hillenbrand Industries     54.30     -3.93
FMX     Fomento Economico          33.80     -1.10

----------------------------------------- 
Recently Overbought With Bearish Signals (Stocks over $20)
------------------------------------------- 
Ticker  Company Name               Close     Change 

PNRA    Panera Bread Co            27.00     -0.91


=================================================================
To stop receiving this PremierInvestor.net Newsletter,
send email to Contact Support
=================================================================
DISCLAIMER
=================================================================

This newsletter is a publication dedicated to the education
of stock traders. The newsletter is an information service
only. The information provided herein is not to be construed
as an offer to buy or sell securities of any kind. The
newsletter picks are not to be considered a recommendation
of any stock but an information resource to aid the investor
in making an informed decision regarding trading in stocks. It
is possible at this or some subsequent date, the editors and
staff of PremierInvestor.net may own, buy or sell securities
presented. All investors should consult a qualified professional
before trading in any security. The information provided has
been obtained from sources deemed reliable but is not
guaranteed as to accuracy or completeness. PremierInvestor.net
staff makes every effort to provide timely information to its
subscribers but cannot guarantee specific delivery times due to
factors beyond our control.

Please read our disclaimer at:
http://www.optioninvestor.com/page/oin/aboutus/disclaimer.html

*****************************************************************
ADVERTISING INFORMATION

For more information on advertising in PremierInvestor.net
Newsletter, or any Premier Investor Network newsletter please
contact Contact Support.

*****************************************************************


Copyright  2001  PremierInvestor.net. and
The Premier Investor Network.
Do not duplicate or redistribute in any form.




DISCLAIMER

Option Investor Inc is neither a registered Investment Advisor nor a Broker/Dealer. Readers are advised that all information is issued solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy, nor is it to be construed as a recommendation to buy, hold or sell (short or otherwise) any security. All opinions, analyses and information included herein are based on sources believed to be reliable and written in good faith, but no representation or warranty of any kind, expressed or implied, is made including but not limited to any representation or warranty concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we do not necessarily update such opinions, analysis or information. Owners, employees and writers may have long or short positions in the securities that are discussed.

Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report and website should be independently verified.

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